China has warned Vietnam to withdraw its ships from disputed waters after vessels from the two sides collided in a tense confrontation.
Vietnam has accused China of massing 80 vessels, including navy ships, to back an operation to drill for oil off the disputed Paracel islands.
It released video footage to back its claim that Chinese ships had rammed Vietnamese vessels.
The US has called for restraint amid fears of possible clashes.
A foreign ministry official in Beijing said the Vietnamese patrol ships had collided deliberately.
He said the drilling operation was taking place in Chinese territory and Beijing had acted with the utmost restraint.
Vietnam rushed vessels to the area off its central coast after Beijing announced it was sending a drill ship to prospect for oil on 1 May.
Vietnam has plans for oil exploration of its own in the region, which it claims falls under Vietnamese sovereignty.
The Paracels have been controlled by China since it extended its control over the entire island group in a military operation in 1974.
Analysts say there is concern that China is testing the resolve of Vietnam, and the United States, following President Barack Obama's recent visit to the region.
Daniel Russel, the US assistant secretary of state for East Asia and the Pacific, who is in Hanoi, urged both sides not to take unilateral action.
He warned that the confrontation could lead to conflict that would damage the regional and world economies.
Japan's Chief Cabinet Secretary Yoshihide Suga told reporters on Thursday that Japan - which is also involved in a territorial dispute with Beijing over East China Sea islands - was "strongly concerned about heightened tensions in the region due to China's illegal exploration".
"We urge [China] to refrain from taking unilateral actions that would escalate the tensions, and exercise restraint in accordance with international law," Mr Suga said, according to the Japanese news agency Kyodo.
China claims a U-shaped swathe in the South China Sea that overlaps areas claimed by several of its neighbours.
The Philippines is currently taking China to the UN court over maritime territorial disputes.
On Wednesday, Philippine police seized a Chinese fishing boat and detained its 11 crew in another disputed part of the South China Sea, prompting a protest from China.
China has called for the immediate release of the fishermen and their boat.
Foreign ministry spokeswoman Hua Chunying warned the Philippines to "make rational explanations" and "take no more provocative action".
She added that a Chinese maritime police boat had arrived in the area.
The Philippines said the fishermen would be investigated to see if they broke the law, including one on endangered species. Several hundred turtles were reportedly found in their boat.
National Police Chief Alan Purisima told media the fishermen's arrest was made in Philippine territory.